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posted on 21 February 2016

Insider Trading 19 February 2016: 205 Million Purchase Of Cancer-focused Biotech Company Incyte Corporation

by Asif Suria

Insider buying more than doubled again last week with insiders buying $540.45 million of stock compared to $252.12 million in the week prior. Selling also increased with insiders selling $938.04 million of stock last week compared to $693.93 million in the week prior.

A big part of this jump in insider buying was driven by a $205 million purchase of cancer-focused biotech company Incyte Corporation (INCY) by the multi-billion dollar hedge fund Baker Brothers. We normally tend to exclude purchases by funds but decided to make an exception in this case because one of the Baker Brothers, Julian Baker, serves on the board of Incyte and because they are well known in the biotech industry to have an excellent track record. It was interesting to see that their last reported purchases of Incyte were back in late 2011 and early 2012 at prices ranging from $12.21 to $16.53.

Beyond the Baker Brothers purchases, there were other insiders that stepped up to the plate last week even as the S&P 500 rallied almost 3% for the week. Some of the noteworthy purchases that did not make the top 5 list include a $5 million purchase by the CEO of Akamai Technologies (AKAM), a nearly $1.2 million purchase by the CEO of payment services provider First Data (FDC) and a dual purchase at Twitter (TWTR) by its Executive Chairman and by the CFO Anthony Noto who has been consistently buying shares every few months.

Sell/Buy Ratio: The insider Sell/Buy ratio is calculated by dividing the total insider sales in a given week by total insider purchases that week. The adjusted ratio for last week dropped to 1.74. In other words, insiders sold almost 2 times as much stock as they purchased. The Sell/Buy ratio this week compares favorably with the prior week, when the ratio stood at 2.75. We are calculating an adjusted ratio by removing transactions by funds and companies and trying as best as possible only to retain information about insiders and 10% owners who are not funds or companies.

Insider Sell Buy Ratio February 19, 2016

Insider Sell Buy Ratio February 19, 2016

Note: As mentioned in the first post in this series, certain industries have their preferred metrics such as same store sales for retailers, funds from operations (FFO) for REITs and revenue per available room (RevPAR) for hotels that provide a better basis for comparison than simple valuation metrics. However metrics like Price/Earnings, Price/Sales and Enterprise Value/EBITDA included below should provide a good starting point for analyzing the majority of stocks.

Notable Insider Buys:

1. Incyte Corporation (INCY): $72.7

Director Julian Baker acquired 3,138,592 shares of this drug discovery and development company, paying $65.32 per share for a total amount of $205.01 million. These shares were acquired indirectly through Baker Brothers Life Sciences Capital and other related entities.

You can view the list of recent insider transactions for Incyte Corporation here.

P/E: 2Forward P/E: 57.24Industry P/E: 22.66
P/S: 17.64Price/Book: 77.45EV/EBITDA: 219.03
Market Cap: $13.61BAvg. Daily Volume: 2,336,52052 Week Range: $55 - $133.62

2. Seattle Genetics, Inc. (SGEN): $30.43

Shares of this biotech company were acquired by 2 insiders:

  • Director Felix Baker acquired 1,269,147 shares, paying $30.43 per share for a total amount of $38.62 million. These shares were purchased indirectly by Baker Bros. Advisors LP.

  • Director John A. Orwin acquired 2,000 shares, paying $28.33 per share for a total amount of $56,660. Mr. Orwin increased his stake by 22.99% to 10,700 shares with this purchase.

You can view the list of recent insider transactions for Seattle Genetics, Inc. here.

P/E: N/AForward P/E: N/AIndustry P/E: 22.66
P/S: 12.36Price/Book: 6.07EV/EBITDA: -32.38
Market Cap: $4.24BAvg. Daily Volume: 1,257,26052 Week Range: $26.02 - $52.33

3. Prospect Capital Corporation (PSEC): $6.825

Shares of this business development company were acquired by 2 insiders:

  • Chief Executive Officer John F. Barry acquired 4,342,000 shares, paying $6.24 per share for a total amount of $27.08 million. Mr. Barry increased his stake by 32.84% to 17,564,826 shares with this purchase.

  • Chief Operating Officer M. Grier Eliasek acquired 60,000 shares, paying $6.23 per share for a total amount of $373,649. Mr. Eliasek increased his stake by 9.57% to 687,196 shares with this purchase.

You can view the list of recent insider transactions for Prospect Capital Corporation here.

P/E: 22.38Forward P/E: 6.83Industry P/E: 11.36
P/S: 3.03Price/Book: 0.71EV/EBITDA: N/A
Market Cap: $2.43BAvg. Daily Volume: 4,486,74052 Week Range: $5.21 - $8.85

4. New Mountain Finance Corporation (NMFC): $12.08

Director Steven B. Klinsky acquired 635,255 shares of this business development company, paying $11.75 per share for a total amount of $7.46 million. Mr. Klinsky increased his stake by 16.32% to 4,527,825 shares with this purchase.

You can view the list of recent insider transactions for New Mountain Finance Corporation here.

P/E: N/AForward P/E: N/AIndustry P/E: 11.36
P/S: N/APrice/Book: N/AEV/EBITDA: N/A
Market Cap: $N/AAvg. Daily Volume: N/A52 Week Range: $10.87 - $15.19

5. Endurance Specialty Holdings Ltd. (ENH): $62.86

Chairman & Chief Executive Officer John Charman acquired 84,203 shares of this insurance company, paying $61.56 per share for a total amount of $5.18 million. These shares were acquired indirectly by Dragon Global Holdings Ltd.

You can view the list of recent insider transactions for Endurance Specialty Holdings Ltd. here.

P/E: 10.97Forward P/E: 9.63Industry P/E: 10.94
P/S: 1.97Price/Book: 0.85EV/EBITDA: 3.17
Market Cap: $4.20BAvg. Daily Volume: 278,97452 Week Range: $57.97 - $70.5

You can view the full list of purchases from this Insider Buying page.

Notable Insider Sales:

1. Walgreens Boots Alliance, Inc. (WBA): $77.57

Director Barry Rosenstein sold 1,720,900 shares of this pharmacy-led health and wellbeing company for $76.96, generating $132.45 million from the sale. These shares were sold indirectly by JANA Partners LLC.

You can view the list of recent insider transactions for Walgreens Boots Alliance, Inc. here.

P/E: 18.89Forward P/E: 15.51Industry P/E: 18.77
P/S: 0.73Price/Book: 2.71EV/EBITDA: 12.38
Market Cap: $83.68BAvg. Daily Volume: 4,879,33052 Week Range: $71.5 - $97.3

2. Honeywell International Inc. (HON): $107.27

Shares of this industrial technology and manufacturing company were sold by 2 insiders:

  • Chairman & CEO David M. Cote sold 344,936 shares for $104.85, generating $36.17 million from the sale.

  • Director Gordon M. Bethune sold 2,105 shares for $103.49, generating $217,846 from the sale.These shares were sold as a result of exercising options immediately prior to the sale.

You can view the list of recent insider transactions for Honeywell International Inc. here.

P/E: 17.76Forward P/E: 14.8Industry P/E: 16.87
P/S: 2.12Price/Book: 4.49EV/EBITDA: 11.29
Market Cap: $82.53BAvg. Daily Volume: 3,713,54052 Week Range: $87 - $107.52

3. Hasbro Inc. (HAS): $72.08

Director Alan G. Hassenfeld sold 450,000 shares of this toy company for $71.90, generating $32.36 million from the sale. These shares were sold indirectly through a trust.

You can view the list of recent insider transactions for Hasbro Inc. here.

P/E: 20.19Forward P/E: 16.57Industry P/E: 19.63
P/S: 2.03Price/Book: 5.43EV/EBITDA: 11.5
Market Cap: $8.98BAvg. Daily Volume: 1,660,37052 Week Range: $59.74 - $84.42

4. Hawaiian Holdings Inc. (HA): $39.77

Shares of this airline company were sold by 3 insiders:

  • Director Zac Hirzel sold 396,233 shares for $37.13, generating $14.71 million from the sale. These shares were sold indirectly by Hirzel Capital.

  • President and CEO Mark B. Dunkerley sold 63,000 shares for $36.57, generating $2.3 million from the sale.

  • Director William S. Swelbar sold 2,134 shares for $38.06, generating $81,224 from the sale.

You can view the list of recent insider transactions for Hawaiian Holdings Inc. here.

P/E: 13.35Forward P/E: 8.55Industry P/E: 10.73
P/S: 0.9Price/Book: 4.69EV/EBITDA: 5.01
Market Cap: $2.12BAvg. Daily Volume: 1,297,93052 Week Range: $18.38 - $40.13

5. The Ultimate Software Group, Inc. (ULTI): $163

Shares of this software-as-a-service (SAAS) provider were sold by 5 insiders:

  • Chairman, President and CEO Scott Scherr sold 45,507 shares for $159.37, generating $7.25 million from the sale.

  • Vice-Chairman & COO Marc D. Scherr sold 19,496 shares for $159.48, generating $3.11 million from the sale.

  • Exec. VP, CFO and Treasurer Mitchell K. Dauerman sold 12,064 shares for $159.34, generating $1.92 million from the sale.

  • Senior VP, Technology Adam Rogers sold 3,481 shares for $158.02, generating $550,080 from the sale.

  • Senior VP, Enterprise Sales Gregory Swick sold 2,900 shares for $158.13, generating $458,587 from the sale.

You can view the list of recent insider transactions for The Ultimate Software Group, Inc. here.

P/E: 214.47Forward P/E: 40.55Industry P/E: 42.45
P/S: 7.43Price/Book: 13.74EV/EBITDA: 68.83
Market Cap: $4.67BAvg. Daily Volume: 333,39352 Week Range: $148.26 - $216.27

You can view the full list of sales from this Insider Sales page.

Disclaimer Clients of Signal Partners, LLC and I may have positions in any of these stocks at any time. Please do your own due diligence before buying or selling any securities mentioned in this article. We do not warrant the completeness or accuracy of the content or data provided in this article.

Connect with me on LinkedIn: http://www.linkedin.com/in/asifsuria or follow me on Twitter @asifsuria

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